Opinion factsheet


    Fiscal capacity and automatic stabilisers in the Economic and Monetary Union

    : CDR 4164/2016
    : GRAF, Carl Fredrik
    : EPP (European People's Party)
    : ECON
    : Adopted
    : 08/02/2017
    As asymmetric shocks also affect the regional and the local level the opinion should enable the CoR to assume a proactive role in the preparation of the next steps to make EMU more resilient and to express its point of view on whether and to which extent a fiscal capacity is needed to achieve a genuine EMU and what functions it should fulfil.

     believes that in order to regain trust, the euro must deliver on its promise of stability, convergence, growth and jobs. A fiscal capacity could help in achieving such goals;

     reiterates its belief that, in the short term, completion of the Banking Union is the most effective instrument for preventing crises in the financial system and minimising the negative effects of economic shocks ;

     takes note of the belief that fiscal capacity is necessary to equip EMU with a temporary shock absorption mechanism. A possible fiscal capacity should not overlap with cohesion policy instruments but be complementary to those instruments;

     considers however that a fiscal capacity at the EU level should not be designed in such a way that the risk of permanent transfers would arise, thus undermining the incentives for sound economic and social policy making and policy implementation at national or regional levels or incentives to address national or regional structural weaknesses. Accordingly, and to prevent moral hazard, it should be tightly linked to compliance with the broad EU governance framework and progress in convergence;

     considers that two functions could be fulfilled; firstly, Member States' structural reforms could be incentivised in good economic times in order to foster economic and social convergence within the euro area and improve its economic competitiveness and resilience; and, secondly, differences in the business cycles of euro area Member States stemming from structural factors could be smoothed out by the creation of an instrument to address asymmetric shocks;

     points out that it would be worth examining whether an additional tool to enhance structural reform, designed to provide funding in the form of loans for a Public Investment Strategy, would be useful. This could allow the identification of a pool of financing sources and investment projects needed to support the implementation of the necessary reforms.